NJ Cable Tax Diverted to Deficit Reduction

Using a state tax on cable television service to offset cable bills for low-income and elderly customers was labeled a “dumb idea” by New Jersey Governor Chris Christie. Instead of using it for its intended purpose, the government has been diverting the money to help balance the state budget.

The New Jersey Cable Television Universal Access Fund was signed into law in 2006 by former Governor Jon S. Corzine, a Democrat. The fund collected $9.2 million, none of which was ever used for its intended purpose, as no mechanism had been developed to disburse it.

“The law for distribution of the funds to the elderly was never implemented,” said Steve Effros, president of Effros Communications, a Clifton, Virginia-based communications industry consulting firm. “They collected the money from cable companies and subscribers, but they never used it for the purpose they said they were collecting it for. Instead they took the money and applied it to other government programs,” he said.

‘Cable a Right?’Legislative proponents of the bill argued cable television granted access to entertainment and news otherwise unavailable to low-income New Jersey residents. According to a report in the Philadelphia Inquirer, however, the bill’s sponsors were unaware the fund had never been distributed.

The fund originated as part of the package of laws regulating Verizon Communications upon its entry into the cable industry. Lawmakers instituted a 4 percent tax on Verizon revenues, retroactively applied as well to providers Cablevision Systems, Comcast, and Time Warner. One-half of one percent of the tax was designated for assistance for cable customers enrolled in New Jersey’s Pharmaceutical Assistance to the Aged and Disabled (PAAD) program.

PAAD has approximately 174,000 beneficiaries. To qualify for the program, singles must earn less than $24,432 per year; and married couples must earn less than $29,956. On average, expanded basic cable service in the state costs $61.19.

Repeal Bill OfferedGov. Christie explained New Jersey cannot afford to administer the fund as intended prior to releasing the state budget on February 22. “It was a dumb idea in my opinion,” Christie stated in The Star-Ledger. “To have the taxpayers of New Jersey pay for cable TV, I mean seriously, has cable TV become a constitutional right now we are going to pay for, in this time of budget constraints?”

Two weeks prior, State Sen. Shirley K. Turner (D-Mercer) announced she would introduce a bill to repeal the program.

“If the money won't go to low-income residents, then we need to stop collecting the tax,” Turner told New Jersey Capitol Report. “And if cable companies can use those newfound savings to reduce bills even a little for all their cable customers, then it would be well worth it.”

‘Another Hidden Tax’Failure to use earmarked money for its original purpose is not illegal in New Jersey unless a constitutional amendment expressly states how the fund should be spent. Effros notes that although the tax is on cable provider profits, the burden was more than likely passed on to customers.

“It’s a fascinating policy question to ask whether the charges applied to the bills of cable subscribers should be returned to them by the government, or whether that money just goes into the general treasury and the fee becomes another hidden tax, but one applied only to cable television customers,” he said.

“I would think that is at best unfair,” Effros continued. “If you are going to impose a new tax, then call it what it is and apply it to everyone, not just those who choose to buy a certain type of service.”